FEDSPEAK: What are the Perceived Barriers to Homeownership for Young Adults?
Abstract
As the U.S. emerges from the Great Recession, there is concern about slowing rates of new household formation and declining interest in homeownership, especially among younger households. Potential reasons that have been posited include tight mortgage credit and housing supply, changing preferences over tenure in the wake of the foreclosure crisis, and weak labor markets for young workers. In this paper, we examine how individual housing choices, and the stated motivations for these choices, reflect local housing affordability and individual financial circumstances, focusing particularly on young households. The analysis makes use of new individual-level data from the Survey of Household Economics and Decisionmaking (SHED). We find that housing affordability is correlated with county-level tenure rates and individual level probability of homeownership for households with heads under age 40. However, it appears that young households’ perceived barriers to homeownership are more closely related to individual financial circumstances than local housing market conditions.
Conclusions
Policymakers, researchers and housing industry members have been concerned at the low rates of new household formation and first-time homeownership in the wake of the Great Recession. As yet, it is unclear whether young households’ delay in forming independent households and purchasing homes reflects macroeconomic factors, local housing market conditions, local labor market conditions, individual financial circumstances or shifts in preferences. In this paper, we examine the determinants of tenure for young households at both county-level and individual-level, focusing particularly on the roles of local housing affordability and individual financial conditions.
Results at the county level are consistent with hypotheses from the housing economics literature: higher absolute and relative housing costs are associated with lower homeownership among young households, controlling for other factors. Results from individual-level analysis on housing tenure are also consistent with these patterns. Higher prices are associated with lower odds of owning for young respondents. Additionally, results indicate that having student loan debt increases the odds that young renters say they can’t quality for a mortgage and having either credit card or student loan debt increases the odds that they say they cannot afford a down payment. More puzzling, however, is that county-level measures of housing affordability generally are not significantly predictive of the perceived barriers to homeownership among young renters, and the one instance where they are – considering the impact of the price-rent ratio on renting because it is cheaper – the direction of the effect is the opposite of that expected. This seems to suggest, consistent with the findings in Rogers and Winkler (2014), that local housing market conditions have little impact on the stated reasons for one’s housing decisions, and that instead individual circumstances and backgrounds play a more important role.
Full paper below…
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4closureFraud.org
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When they see how their friends parents, their aunts and uncles and possibly their parents got screwed they are scared of the same happening to them. In todays subdivisions so many homes sitting empty with weeds growing in the yards, moldy walls from no climate control being on, no one taking responsibility for the care, no wonder they are afraid when all they have to do is look around. Best to sit tight, hold on to their money, keep their credit clean, and wait to see how this all plays out.